Can I use capital from a QOZ sale for other purposes?

Answers

• 

  Erik Kodesch

  Lane Powell

  August 17, 2019

  I think the potential problem is whether the intermediate investment is qualified property at the six-month testing date that occurs during the 12 months. I believe the cash proceeds from the sale are essentially treated as working capital. However, if you use the cash to make an investment that is beyond something into which working capital can be invested while it is working capital, there may be an issue. That said, I would need to do more research before being able to give a definitive answer.

• 

  Blake Christian

  HCVT CPAs

  August 12, 2019

  You can invest the funds into time deposits with maturities of 18 months or less and the funds will not be treated as non-qualifying OZ assets. To be clear, if the liquidated asset creates a tax gain during the 10-year OZ period, the gain can be reported by the fund or investors, depending on structure. Re-investment within 12 months only helps avoid the NQ asset test but does not defer tax gain.

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  Pat Cardwell

  Jardim, Meisner & Susser

  August 12, 2019

  You can roll it over to another QOZ opportunity. But confirm that with your accountant.

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  Matthew Rappaport

  Falcon Rappaport & Berkman

  August 13, 2019

  I'm struggling to think of how you would accomplish this while maintaining compliance. If you take the proceeds out of the QOF, you risk an inclusion event. If you leave the proceeds in the QOF but invest in something else, you risk failing the 90% test. While the rules might theoretically allow this, you'd either run afoul of the anti-abuse rules or outright fail the statutory requirements. Hypothetically, if a client approached me with this, I would not recommend doing it.

• 

  Peter McNeil

  Comprehensive Financial Solutions and Tax

  August 13, 2019

  Per the regulations, the proceeds must be continuously held in cash, cash equivalents, and debt instruments with a term of 18 months or less.

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  Matt Campbell

  Hall Estill

  August 22, 2019

  My understanding is it has to be held in a cash equivalent or short-term note not exceeding 18 months in duration.

• 

  Maria De Los Angeles Rivera

  Kevane Grant Thornton

  August 15, 2019

  No. The QOF needs to keep it in cash, cash equivalents or debt instruments 18 month or less until a new project is found. If you invest it in non-qualified assets, you may exceed the 10% allowed.

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